Adjusted Gross Income (AGI)

Adjusted Gross Income (AGI) is the line on Form 1040 that captures total income minus a specific list of “above-the-line” deductions — traditional IRA contributions, HSA contributions, student loan interest (up to $2,500), educator expenses, half of self-employment tax, alimony for pre-2019 divorces, and a few others. It sits below total gross income and above taxable income.

AGI matters far beyond the income tax calculation because most US tax thresholds key off it (or a close cousin, Modified Adjusted Gross Income / MAGI):

• IRA deductibility phase-outs (traditional and Roth).
• IRMAA — Medicare Part B and D premium surcharges in retirement.
• Premium Tax Credit eligibility on ACA marketplace plans.
• Net Investment Income Tax threshold (3.8% surcharge).
• Education credits (American Opportunity, Lifetime Learning) phase-outs.
• Itemized deduction AGI floors (medical expenses above 7.5%, charitable contribution caps).
• Child Tax Credit phase-outs.

Reducing AGI is a recurring tax-planning lever. The most accessible reductions for W-2 workers: HSA contributions (which beat 401(k) at the same dollar level because they also avoid FICA), traditional IRA contributions (if income limits allow), and pre-tax 401(k) elective deferrals (which reduce wages, which reduces AGI indirectly).

Use the federal income tax calculator to see how AGI flows into the bracket calculation.